Unit 1 Practice Exams (Waldon)
Use the " Demand and Supply of Gasoline" Figure 7-1. When the supply curve shifted from S 1 to S 2, the new intersection of supply and demand has a price of ________ and quantity of 400. This could have resulted from ________.
$1.50; an increase in refining technology
Using your google skillz, or bls.gov, find the U.S. Gross Domestic Product. U.S. GDP is closest to:
$18 trillion (lol this is wrong)
Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, they may still be able to purchase the good at the price of
$2 If a good is unavailable because of a shortage in a legal, regulated market, what other option might emerge for consumers and producers?
Use the " Demand and Supply of Gasoline" Figure. Given the initial equilibrium of S 1 and D, any price lower than ________ will create pressure for the price to ________.
$2.50; rise
Use the following information to answer the questions that follow.Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books?
$35
A friend comes up to you and offers to give you a free ticket to the local professional team's baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?
$55
Use the " Demand and Supply of Wheat" Figure 7-2. If there were a decrease in supply of 2,000 bushels at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.
$7; 5,000
Use the " Demand and Supply of Wheat" Figure 7-2. If there were an increase in demand of 2,000 bushels at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.
$7; 7,000
Use the following information to answer the questions that follow.Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the quantity demanded if a price floor is set at $300? Hint: you need to confirm whether or not the price control is binding.
1,100
If Farmer Sam MacDonald can produce 200 pounds of cabbages and 0 pounds of potatoes or 0 pounds of cabbages and 100 pounds of potatoes and faces a linear production possibility curve for his farm, the opportunity cost of producing an additional pound of cabbage is ________ pound(s) of potatoes.
1/2
Use Table 5-1. If George, Barbara, and Dan are the only three buyers in the market, and the price of a bag of chocolate-covered peanuts is $0.80, the total market demand is ________ bags per month.
105
Based on Table 3-2, if an economy is producing at alternative W, the opportunity cost of producing at X is ________ unit(s) of consumer goods per period.
4
Use the " Sugar and Freight Trains" Figure 3-8. Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be:
45 tons of sugar.
The United States, at the point where it is currently producing, must give up the production of 300 motorcycles to produce 15 additional SUVs with the same resources. Which of the following is the opportunity cost of producing 100 motorcycles?
5 SUVs
Use the " Production Possibility Curve for Tealand" Figure 3-4. In the figure, Tealand is currently producing at point C on its production possibility curve. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?
5 million scones
Use the " Strawberries and Submarines" Figure 3-9. Suppose the economy is now operating at point A. The first submarine, which is achieved at point B, would have an opportunity cost of ________ million tons of strawberries.
50
Use the " Market I" Figure 8-16. If a price floor of $15 was imposed on this market, government would need to buy ________ units of the good, and spend a total amount of ________ on its purchase.
5; $75
Based on Table 3-2, iIf the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period.
6
Using your google skillz, or at BLS.gov, find the current national unemployment rate. The national unemployment rate is closest to which number?
7.0%
Use Table 8-2. If the government imposes a price ceiling of $1.00 per can of soda, the quantity of soda demanded will be:
8 units
Use the " Tom's Production Possibilities" Figure 3-5. In the figure, which point or points would represent (an) efficient combination(s) of wine and wheat that Tom could choose to produce?
8 units.
Note: P = Price per lb in $; Qp = Quantity demanded in millions of lbs; Qs = Quantity supplied in millions of lbs. Use Table 8-3. If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:
9.0 million pounds.
Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the quantity supplied if a price floor is set at $50? Hint: you need to confirm whether or not the price control is binding.
90
Smallville has a linear production possibility curve in the production of Good X and Good Y. It can produce 6X per hour or 8Y per hour. Suppose it currently has 240 hours of labor and divides labor hours equally between Good X production and Good Y production. What is the maximum amount of Good Y it can produce?
960Y
At which point on the curve should this economy produce if it wants to maximize future growth?
A
___________ is a real-life example of a price floor.
A minimum wage law
Which is a correct statement about a rent control law?
A rent control law is a price ceiling law that makes apartments cheaper to rent but discourages property owners from renting out apartments.
Suppose university officials felt the price of football tickets at your school are too expensive and decide to limit the price the athletic department can charge for a ticket to a single game. What will result from this decision?
A shortage of tickets will exist.
Use the " Demand for Coconuts" Figure 5-1. If fish is a substitute good for coconuts and the price of fish increases, then the movement that would take place in the model could be:
A to C
Use the " Demand for Coconuts" Figure 5-1. If there is an overall increase in taste and preference for coconuts, then the movement that would take place in the model could be:
A to C.
Use the " Supply of Coconuts" Figure 6-1. If there is an improvement in the technology used to harvest coconuts (e.g., a faster, less expensive coconut picker), then the movement in the model could be:
A to C.
Which of the following will cause a rightward shift in the supply curve for tobacco?
An improvement in the technology used in the production of tobacco
When Katy went to buy Kylie Jenner's Lip Kit, she discovered that the product that was normally $29.95 was selling for $200.00! Which of the following best explains this phenomenon?
An increase in the number of teenage girls with a desire to have fat lips increased demand driving the price higher.
The PPCs for Bikini Bottom represent possible production outcomes given changes that may occur in the economy. There are 4 PPCs: A, B, C, D. Given that PPC B is the current PPC for the economy, which PPC could be its new PPC if new technology is developed that increases the production of Krabby Patties, but has no effect on Robot production?
An increase in the price of collagen, an input to the production of Kylie Jenner's Lip Kit.
When Katy went to buy Kylie Jenner's Lip Kit, she discovered that the product that was normally $29.95 was selling for $200.00! Which of the following best explains this phenomenon? (With production)
An increase in the price of collagen, an input to the production of Kylie Jenner's Lip Kit.
The government decides to impose a price ceiling on a good, because it thinks the market-determined price is "too high." If the government imposes the price ceiling below the equilibrium price:
B and D
Use " Demand for Coconuts" Figure 5-1. If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be:
B to A.
Use the " Supply and Demand in the Orange Juice Market" Figure 7-3. A reputable scientist asserts in a major scientific publication that drinking orange juice will increase your life span. We can expect the new equilibrium point in the orange juice market to be at:
B. (up from the supply curve)
Use the " Tom's Production Possibilities" Figure 3-5. In the figure, which point or points would represent (an) efficient combination(s) of wine and wheat that Tom could choose to produce?
Binding price floors encourage the formation of a black market.
Which of the following is an accurate statement about the consequence of a binding price floor?
Binding price floors encourage the formation of a black market.
In which graph below is the amount of "Y" inversely related to the amount of "X"?
C
Use the " Demand for Coconuts" Figure 5-1. If coconuts are considered a normal good and the overall income level of consumers is falling, then the movement that would take place in the model could be:
C to A
The PPCs for Bikini Bottom represent possible production outcomes given changes that may occur in the economy. There are 4 PPCs: A, B, C, D. Given that PPC B is the current PPC for the economy, which PPC could be its new PPC if new technology and more resources allow for increased production of both robots and krabby patties?
D
French fries and hamburgers are complements. Suppose that the cost of the ingredients used to make hamburgers rises, so that the price of a hamburger rises. The demand for French fries will _____, the equilibrium price of French fries will ________ and the equilibrium quantity will ________.
Demand: decrease, Price: decrease, Quantity: decrease
_________________ is the study of how societies' unlimited wants and needs are satisfied by efficiently utilizing scarce resources.
Economics
If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income?
Equilibrium price increases and equilibrium quantity increases.
Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?
Equilibrium price will be indeterminate and equilibrium quantity will go up.
In the soft drink market, an increase in the price of sugar, a necessary ingredient for soft drinks, and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following?
Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
All of the points on the PPC represent resources being used efficiently EXCEPT:
F (inside the curve)
Which of the following questions is appropriate to the study of macroeconomics?
How does the aggregate price level affect overall consumer spending?
Which of the following statements would be a part of macroeconomics? I. The central bank has lowered interest rates to lessen the impact of a recession. II. A severe drought in the American Midwest has reduced the corn harvest and increased corn prices. III. The U.S. Gross Domestic Product has risen sharply, indicating that the recession might be near an end.
I and III only
Of the following statements, which reflect(s) a normative view? I. The U.S. needs to increase the minimum wage to $10 per hour. II. An effective minimum wage results in unemployment. III. An effective minimum wage is a form of a price floor.
I only
Which of the following methods of encouraging recycling is likely to be most effective?
Imposing a tax per unit of garbage generated
Which of the following methods of reducing pollution is likely to be most effective?
Imposing on firms that pollute a per-unit tax on pollution generated
In Kessy's old kitchen, he could bake 10 cookies or mix 15 glasses of lemonade in one day. Now Kessy has a larger kitchen with more productive appliances. How does this impact his production possibility curve?
It shifts his production possibility curve outward.
One way to alleviate traffic on the Tollway would be to increase tolls. In fact, the LBJ toll lanes have 'dynamic pricing', meaning the tolls increase during peak times. This illustrates:
Law of Demand
Match the following transactions to the appropriate flow(s) in the circular flow diagram below.
Mr. Waldon pays for his daily Reese's Peanut Butter Cup ration. - Flow 4 (Household to Product Market to Businesses) Ben goes to work for Charles Schwabb and starts making the big bucks. - Flow 1 and 2 (Households and Resource Market) President Hillary increases taxes on the rich, and then uses the money to subsidize her friends' businesses. - Flows 6 and 7 (Households to Government, Government to Businesses) America's corporate tax rate is increased from 38% to 50%, and the money is used to pay students to go to college. - Flows 5 and 8 (Businesses to Government, Government to Households) Exxon buys Mr. Waldon's oil so they can make gasoline. Which flow is just the oil? - Flow 2 (Households to Resource Market to Businesses)
Do all buyers benefit from a binding price ceiling?
No. A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market.
Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?
Overall supply will decrease
Use " Market for Tortillas" Figure 8-13. If there is a nonbinding price floor in the market for tortillas, the price would be equal to ________, consumers would demand ________, and producers would supply ________.
P2; Q2; Q2
Which of the following principles underlie the economics of individual choices?
People usually exploit opportunities to make themselves better off.
Use Table 8-7. Demanded. If a price ceiling of $10 were imposed in this market, then:
Q d would be greater than Q s.
Use the " Rent Controls" Figure 8-1. If rent controls are imposed, they will most likely be set at either ________ or ________.
Rent 0; Rent 1
Which of the following principles underlie the interaction of individual choices?
Resources should be used as efficiently as possible to achieve society's goals.
In the market for breakfast cereal, the market is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?
Supply will decrease.
Which of the following statements is a normative statement?
The best way to encourage growth in the economy is through government spending.
Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and, at the same time, a boat carrying a large shipment of iPods is attacked by sea monsters and sunk?
The change in price is uncertain and quantity decreases.
Consider the market for corn. What happens if there is an increased demand for corn tortillas and, at the same time, a new corn seed becomes available that increased the per-acre yield dramatically?
The change in price is uncertain, quantity increases.
What would you expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?
The equilibrium price of bagels will be indeterminate and the equilibrium quantity will go up.
When people move to an area of the world that was previously unpopulated, we expect more consumers and more producers to spring up in that area. What would we expect to happen to the price and quantity in the markets where this happens?
The equilibrium price will be indeterminate and equilibrium quantity will go up.
In agriculture, a "bumper crop" refers to a particularly productive harvest. If there is a bumper crop for wheat at the same time that more people become allergic to wheat and all else is held constant, what will happen to the equilibrium price and quantity for wheat?
The equilibrium price will go down and equilibrium quantity will be indeterminate.
Top Ramen is a brand of noodles that is widely considered to be an inferior good with a high salt content. What would happen to the equilibrium price and equilibrium quantity of Top Ramen if income went up and the price of salt decreased?
The equilibrium price will go down and equilibrium quantity will be indeterminate.
Shoes are considered to be a normal good. What would happen to the equilibrium price and equilibrium quantity of shoes if income increases and the cost of labor to produce shoes increases?
The equilibrium price will go up and equilibrium quantity will be indeterminate.
What happens to the equilibrium price and equilibrium quantity of a good if both the producers and the consumers of that good expect its price to be higher in the future?
The equilibrium price will go up and equilibrium quantity will be indeterminate.
Kim attends the farmer's market in her hometown of Bakersfield every Sunday. She notices that all of the oranges sold by the many different farmers at the market have roughly the same price, as do most other products that are alike. Which statement best explains why the prices are so similar?
The farmer's market in Bakersfield is a competitive market so neither the consumer nor the producer has a large influence on the price, allowing for the market to set the price.
The basic concern of economics is:
The overall consumption of the good decreases, assuming the good does not have a vertical demand curve.
When the government places a tax on a good and all else is held constant, which of the following would most likely happen?
The overall consumption of the good decreases, assuming the good does not have a vertical demand curve.
What will happen in a market where a nonbinding price ceiling is removed?
The price and quantity will not change in the legal market.
What would happen to the equilibrium price and quantity of shirts if the price of cotton decreases and all else is held constant?
The price falls and the quantity rises.
A change in which of the following will cause a change in the quantity demanded of coffee?
The price of coffee
A binding price ceiling will have the following consequences:
The quantity demanded will always exceed the quantity supplied.
If the price of rubber were to increase by 20% over the fiscal year and if all else were held constant, what would you expect to happen to the supply curve of tires that are sold separately from automobiles?
The supply curve would shift to the left.
You are an owner of a restaurant. In an attempt to increase sales, you have lowered prices by 10%. Which of the following is a NOT consequence of this price change?
The supply of restaurant meals will increase
A nonbinding price floor has the following consequences:
There are no consequences to a nonbinding price floor.
Suppose that many people who earn a living catching fish decide they can make more money selling t-shirts and switch occupations. How will this affect the number of fish supplied by producers?
There will be a decrease in supply.
As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?
They are increasingly willing to substitute away from producing the good, and the supply curve becomes more elastic.
Why do government leaders impose price controls?
They are trying to ensure that a social goal is satisfied.
If all else is held constant, what would happen to the equilibrium price and quantity of iPhones if the price of an Android phone decreased?
They would both decrease.
Which of the following statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $6.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers.
X is positive; Y is normative; Z is positive
An announcement that smoking will harm your ability to think clearly will most likely result in:
a decrease in the demand for cigarettes.
A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
a decrease; a decrease
Use the " Consumer and Capital Goods II" Figure 3-10. The movement from Curve 1 to Curve 2 indicates:
a growing ability of the economy to produce capital and consumer goods.
Use Table 6-3. If the price of lemonade were $1.25 per cup, we would expect to see:
a market in equilibrium.
A price ceiling is likely to result in:
a persistent shortage, a transfer of surplus from producers to consumers, and inefficient allocation to consumers.
A student organization is formed on your local college campus to protest against the high rent prices for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for?
a price ceiling
If the government sets out to help low-income people by establishing a maximum amount that can be paid for rent:
a price ceiling has been set and a shortage of rental units may occur.
A price floor or a price ceiling is an example of:
a price control.
For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes ________ in the equilibrium price of a hamburger and ________ in the equilibrium quantity of hamburgers.
a rise; an increase
Many public utilities burn oil to generate electricity. If the price of oil increases, we would expect there to be:
a shift to the left in the supply curve of electricity and a higher price for electricity.
Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price that it charges for its motorcycles, we can expect:
a shift to the right in the demand curve for Hondas and higher prices for Hondas.
Use Table 8-1. In response to popular anger over the high price of fried Twinkies, the government imposes a price ceiling of $1.20 per fried Twinkie. From this table, the price ceiling causes:
a shortage of 3,000 fried Twinkies. (Qd = 8k, QS = 5k. 8-5 = 3)
If the opportunity costs of production are constant, then the production possibility curve is:
a straight line.
At a price floor of $6, this market is experiencing
a surplus
Use " Market for Blue Jeans" Figure 8-11. If a binding price floor exists in the market for jeans, the market outcome would be:
a surplus of 25 jeans.
An effective price floor would result in:
a surplus of the good.
In order for a price floor to be binding, it must be set
above the equilibrium price
When the price is _________ the equilibrium price, we would expect there to be a _________, causing the market to put _________ pressure on the price until it went back to the equilibrium price.
above; surplus; downward
The trade-off between equity and efficiency occurs because:
allocating resources fairly may cause inefficiency.
An improvement in technology:
allows a producer to increase output with the same amount of input.
Use the " DVD Market" Figure 6-2. At a rental price of $3, there will be
an excess demand of 40 DVD rentals.
Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. As a result of the government legislation, there will be
an excess supply of Big Macs
An effective price ceiling will most likely result in which of the following?
an increase in consumer surplus
Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:
an increase in equilibrium price and quantity.
A beneficial technological change enhances the production of the cranberry crop. At the same time, scientists discover the potential health benefits of cranberries. This will result in:
an increase in the equilibrium quantity, and an uncertain impact on the equilibrium price of cranberries.
In the market for beef tacos, a normal good, you observe that the equilibrium price and quantity have increased. This can only be caused by:
an increase in the incomes of people who eat tacos.
The law of demand is illustrated when:
an increase in the purchases of personal computers results from lower prices.
A decrease in the price of a good will result in:
an increase in the quantity demanded.
If the price of mozzarella cheese (an ingredient in pizza. declines due to a major technological breakthrough in the dairy industry, there would be:
an increase in the supply of pizza.
The effect of an increase in productive inputs such as labor and capital can be shown by
an outward expansion of the production possibility curve.
The law of demand states that, other things equal:
as the price increases, the quantity demanded will decrease.
Use the " Demand and Supply of Gasoline" Figure 7-1. Given the equilibrium after a change in supply from S 1 to S 2:
at the old price of $2.50, there will be pressure for the price to fall.
If you were a politician, why would you find it difficult to remove a binding price ceiling?
because it greatly benefits some consumers who are also voters
Producers may supply a good with an inefficiently low quality if the government imposes a(n):
binding price ceiling.
A(n) ________ market is a market in which goods or services are bought and sold illegally.
black
Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:
cause a surplus of corn.
Holding everything else constant, if the price of X decreases and the demand for Y increases, then this most likely means that X and Y are:
complements.
An increase in the demand for gasoline today caused by concerns that gasoline prices will be higher tomorrow is most likely attributable to which of the following?
consumer expectations
When the price of Dr. Pepper increases, the quantity demanded will:
decrease
Consider the supply curve for cotton shirts. An increase in the price of cotton will:
decrease the supply of cotton shirts.
When firms in a market expect the price of their product to rise, the supply curve of their good:
decreases, causing the equilibrium price to rise.
Use the " Consumer and Capital Goods" Figure 3-3. The movement from Curve 1 to Curve 2 indicates:
economic growth.
If the price of Gatorade increases, the:
equilibrium price of Powerade will increase because of a shift in demand
According to a supply and demand model for apples, if the average household income decreases at the same time ten apple orchards go out of business, one would expect the:
equilibrium quantity of apples in the market to decrease and the equilibrium price of apples to be indeterminate.
Question Text: Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the
equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase.
Resources are being used efficiently when:
every opportunity to make people better off has been utilized.
Use Table 8-7. A government-imposed price ceiling equal to $5 would result in:
excess demand.
The problem of determining what goods and services society should produce:
exists because there are not enough resources to provide all the goods and services that people want to purchase.
A monopoly:
exists when a single company supplies the entire market for a particular good or service.
The market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will ________.
fall if the supply increase is larger than the demand increase; rise
Gasoline, a derivative of oil, is a large part of transportation costs for many producers. If the price of oil increases at the same time that incomes fall for many consumers, one would expect that the equilibrium price of many normal goods would ________, while their equilibrium quantities would ________.
fall, rise, or stay the same; fall
The price of microchips used to produce computers falls. As a result, the equilibrium price of computers ________ and the equilibrium quantity ________.
falls; increases
A decrease in the price of eggs will result in a(n):
greater quantity of eggs demanded.
Suppose the government sets a price floor below the current price of the good. This price floor will:
have no effect on the price of the good.
To be binding, a price floor must be set at a price:
higher than the equilibrium price.
Why is it often difficult to remove a binding price floor after it exists?
in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control
A technological advance in the production of automobiles will:
increase the supply of automobiles.
Economists know that a particular good can be classified as an inferior good if a(n) ________ in buyers' income causes a(n) ________.
increase; decrease in demand
Over the past few years the technology associated with producing flat-panel televisions has improved. This has led to a(n) ________ in ________ flat-panel televisions.
increase; the supply of
Use the " Bicycles and Radishes" Figure 3-7. The country depicted in this figure is currently operating at point M. It could produce at point I only if it:
increased the quantities of capital, natural resources, or labor available or improved its technology.
The market for corn is currently in equilibrium. Which of the following is most likely to increase the equilibrium price of corn?
increasing production of corn-based ethanol
Use the " Production Possibility Curve" Figure 3-6. Points A, B, E, and F:
indicate combinations of cars and computers that society can produce using all of its resources efficiently.
After graduation from college, you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n):
inferior good.
Based on the " Guns and Butter" Figure 3-1, If the economy were operating at point B, producing 16 units of guns and 12 units of butter per period, a decision to move to point E and produce 18 units of butter:
involves a loss of 8 units of guns per period.
A supply schedule:
is a table representing the relationship between the price of a good or service and the quantity supplied.
When both supply and demand decrease, the equilibrium price:
is indeterminate and equilibrium quantity decreases.
If the government imposes rent control:
it may result in some landlords leaving the business because they cannot cover costs.
Price ceilings that lead to shortages will impose costs on society because they:
lead to a smaller quantity offered on the market.
After drawing your demand curve, assume a dramatic increase in income taxes decreases consumers' personal disposable income. As a result, consumers are willing and able to buy 10,000 fewer French Bulldogs at each price. Draw a new curve on your graph and label it as D2. Is D2 to the right or to the left of your old curve?
left
Which of the following describe two goods that are most likely substitutes in consumption?
loaves of bread and hamburger buns
If an economy has not achieved efficiency, there must exist ways to:
make some people better off without making others worse off.
The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium price of digital cameras ________ and the equilibrium quantity ________.
may increase, decrease, or stay the same; increases
If the state government allocates additional spending on education, the opportunity cost is:
measured in terms of the alternative uses for that money.
The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families. The law that sets wages would be an example of a:
minimum wage law.
Water is considered a scarce good because:
not enough of it is available for all needs at zero cost
The typical supply curve illustrates that:
other things equal, the quantity supplied of a good is positively related to the price of a good.
"Your local health club is offering a free one-year membership for the person who attends the most yoga classes in March. This results in more people attending yoga." This statement best represents the economic concept of:
people usually exploit opportunities to make themselves better off.
Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents the economic concept of:
people usually exploit opportunities to make themselves better off.
Use the " Production Possibilities and Circular-Flow Diagram" Figure 3-11. Assume the accompanying figures represent the same economy. Suppose that in the circular-flow diagram there is a significant increase in the amount of capital that is flowing to the firms that produce fish. Assume that there is a corresponding decrease in the amount of capital that is flowing to the firms that produce coconuts. This adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward
point B (an increase in fish production).
Use the " Production Possibilities and Circular-Flow Diagram" Figure 3-11. Assume the figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor that is flowing to the firms that produce coconuts. If all other variables remain unchanged, then this adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:
point C (a decrease in coconut production).
Use the " Production Possibilities and Circular-Flow Diagram" Figure 3-11. Assume the accompanying figures represent the same economy. Suppose that in the circular-flow diagram there is a significant increase in the amount of human capital that is flowing to both types of firms (coconut and fish producers). If all other variables remain unchanged, then the adjustment in this economy would be best represented in the production possibilities figure by a movement from point A toward:
point D (an outward shift of the entire curve)
Use " Price Control" Figure 8-9. An effective price floor would be the price indicated at ________ and a ________ would exist as the difference between ________.
point b; surplus; points f and e
Use the " Price Control" Figure 8-2. In the graph, an effective price ceiling would be the price indicated at ________ and a ________ would exist as the difference between ________.
point d; shortage; points i and h
"The unemployment rate is 5%" is a _________________ statement.
positive
Many local governments use parking meters on crowded downtown streets. However, the parking spaces along the street are typically hard to find because the metered price is often set below the market price. This represents a ___________, which results in a ___________ of parking spots.
price ceiling; shortage
When price controls take the form of maximum prices set below the equilibrium price they are:
price ceilings.
Use " Shrimp Market" Figure 8-8. If the government wants to limit shrimp sales to 500 pounds, it could impose a:
price floor of $15 or a price ceiling of $10.
The demand curve slopes downward because
prices and quantity demanded move in opposite directions.
Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. Then, the equilibrium price of bulletproof vests ________ and the equilibrium quantity produced ________.
probably changes, but in an ambiguous direction; increases
Rent controls set a price ceiling below the equilibrium price and therefore:
quantity demanded exceeds the quantity supplied.
When the government removes a binding price floor:
quantity demanded would increase and quantity supplied would decrease.
Use the " Rent Controls" Figure 8-1. If rent controls are set at Rent 1:
rental apartments may be of inefficiently low quality.
The production possibility curve for producing goods X and Y is bowed out from the origin because:
resources are not equally suited for the production of both goods.
"In Colorado, there has been a drought, and rural communities are fighting with urban areas over water." This statement best represents the economic concept of:
resources are scarce.
"In Thailand, all the land, labor, and capital in society are used in a way that has fully exploited all opportunities to make everyone better off." This statement best represents the economic concept of:
resources should be used as efficiently as possible to achieve society's goals.
Based on Table 3-2, the production of 14 units of consumer goods and 1 unit of capital goods per period would:
result in some unused or inefficiently used resources.
If the cost of flour increases from $3 to $5 a bag, you could predict the supply curve for bagels to:
shift to the left.
(Where Quantity Supplied < Quantity Demanded) At a price ceiling of $0.50, this market is experiencing a(n)
shortage
If the supply and demand curves intersect at a price of $14, then any price below that would result in a(n):
shortage.
When a hurricane rips through Florida, the price of oranges rises because the:
supply curve shifts to the left.
You notice that the price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the:
supply of DVD players shifting to the right.
Suppose that the demand for low-skill labor, QD, is represented by the following equation, where W is the wage rate QD = 56,000,000 - 3,000,000 W The supply of low-skill labor, QS, is represented by the equation QS = -8,000,000 + 5,000,000 W If the minimum wage is $9, there will be a ______________ of labor in the market.
surplus
Use Table 8-4. If the government imposes a price floor of $1.00 per can of soda, there will be a(n):
surplus of 3 units.
The demand for meals at a local Applebee's will fall if:
the Olive Garden offers a 10% discount coupon in the local newspaper.
A new startup airline is offering free round-trip tickets to anywhere to the first 600 people who enter the office on the airline's first day of business. You arrive 24 hours before they are scheduled to open to be sure to get the free tickets, and you buy food from vendors while waiting in line. The cost of the tickets to you is:
the cost of food while you wait in line plus the opportunity cost of your time.
When the demand curve shifts to the right and the supply curve is held constant,
the equilibrium price and quantity increase.
The market for milk is initially in equilibrium. Milk producers now engage in a costly advertising program to encourage milk drinking. Assume that the advertising campaign succeeds in shifting consumer tastes toward drinking milk and that milk producers provide more milk to the market. As a result, more milk producers enter the market. Standard demand and supply analysis tells us that:
the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.
Which of the following is an example of a price floor?
the minimum wage
The cost of leaving a championship soccer match before it ends is ________, while the cost of staying for the entire match is ________.
the opportunity cost of not seeing the winning goal with two minutes to go; the opportunity cost of what else you could have done during that time
If the production possibility curve were a straight line sloping down from left to right, this would suggest that:
the opportunity costs of the products are constant.
Use the " Supply and Demand" Figure 8-7. In the market shown in the figure, a binding price floor is represented by:
the price P1.
The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound, then:
the price floor will not affect the market price or output.
According to the law of supply, what is the relationship between price and quantity supplied?
the price of the good increases
Which of the following will cause a movement along a good's supply curve?
the price of the good increases
Which of the following is an example of real investment?
the purchase of a delivery truck by a bakery.
According to the law of demand, all other things being equal,
the quantity demanded falls when the price rises, and the quantity demanded rises when the price falls.
The law of supply states that, all other things being equal,
the quantity supplied falls when the price falls, and the quantity supplied rises when the price rises.
When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the one million dollar improvement will not happen because "that money could be spent building 70 curb ramps." This statement best represents the economic concept of:
the real cost of something is what you must give up to get it.
Use the "Tom's Production Possibilities" Figure 3-5. In the figure, the opportunity cost for Tom to move from point A on the curve to point B is:
there is no opportunity cost for this move.
Although water is very abundant in most places, it is scarce because:
there is not enough of it to meet all needs at zero cost
The government decides to impose a price ceiling on a good because it thinks the market-determined price is "too high." If it imposes the price ceiling above the equilibrium price:
there will be no change to either the price or quantity in the market.
If equilibrium exists:
there will be no remaining opportunities for individuals to make themselves better off.
The basic concern of economics is
to study the choices people make.
The provision of disabled-parking passes to those with disabilities often requires that more than enough spaces are available for those with disabilities. As a result, many of these spaces are vacant quite often when they could be used by able-bodied individuals. Such a situation illustrates the:
trade-off between efficiency and equity.
A normative statement cannot be proven with facts, it is largely opinion.
true
When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:
we say that the transaction takes place on a black market.
A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was:
whatever she would have done with those 48 hours.
Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:
whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.
A good is inferior if:
when income increases, the demand decreases.
A good is normal if:
when income increases, the demand increases.
Economists use the term equilibrium to describe:
when no individual would be better off taking a different action and when no individual has an incentive to change his or her behavior.
Use Table 8-2. If the government does not impose a price control, the price of a can of soda will equal:
$0.75.